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Monday, June 15, 2015

You snooze, you lose . . .

This is an appeal from the Environmental Court that affirmed an administrative finding from the Natural Resources Board (“NRB”) that Respondents’ gravel extraction activities violated an Act 250 residential subdivision permit. At issue in this case are two businesses owned by one person and two large adjacent parcels of land from which sand, rock, and gravel have been extracted from a portion of one or both of the parcels for decades.

In September 1990, the Respondents’ Predecessor in Interest (“PiI”) received an Act 250 permit authorizing a 19 lot residential subdivision on the northern of the two parcels. Among the relevant conditions of the permit—it would expire one year from the date of issuance if there was no indication of intent to proceed with the project, or it would expire on October 1, 2020 unless extended by the District Environmental Commission (DEC”). Other conditions of the permit prohibited "changes . . . in the design or use" of the project without written approval and that the permit and all conditions therein would "run with the land and . . . be binding upon and enforceable against . . . all assigns and successors in interest."

In 1992 the DEC properly extended the time for construction to October 1994. In June of ’94, the Respondent purchased the residential project and the accompanying warranty deed expressly referenced the Act 250 permit "and any and all amendments thereto." Soon after, Respondent applied for and received another permit amendment extending the time for construction until October 1995.

During this time Respondent MGC, Inc., purchased the southerly parcel and continued to operate the gravel pit—"most or all" of which was located on the commercial tract. Of note, no steps were taken to begin the subdivision or develop an internal roadway.

Following a property tax reappraisal in 2006, Respondents filed a request to declare the Act 250 permit abandoned through nonuse. While the DEC issued a notice of intent to abandon the permit, neighbors objected stating that the Respondents had made "material changes" to the use authorized by the Act 250 permit—notably by expanding gravel extraction activities onto the residential lot. The DEC "tabled" the abandonment request "pending a jurisdictional opinion from the district coordinator of the material change question."

After investigation, the district coordinator issued a formal opinion in 2007 which found that the gravel pit had indeed expanded into the residential parcel covered by the Act 250 permit which constituted a “material change” to the permit—which in turn required a permit amendment. Despite the opinion, Respondents did nothing.

In October 2008, the NRB chair issued an administrative order determining that Respondents violated the conditions of the Act 250 permit by making material changes to the project without proper amendments and required Respondents to pay a fine, file a complete Act 250 land-use permit amendment application, and cease all gravel pit operations until the necessary permit approvals had been obtained. The order also informed Respondents of their rights to request a hearing and otherwise appeal the decision. Respondents, again, did nothing but keep their head in the sand, as it were. They did not request a hearing, file an amended application, or terminate the gravel pit operations.

As such, in November 2008, the administrative order became a final judicial order. Respondents did not appeal that judgment.

In January 2013, the NRB—with the trial court's approval—issued an emergency order finding that Respondents violated the original 2008 order by failing to pay the fine, file a permit amendment, or terminate gravel pit operations on the residential lot. This order again directed Respondent to cease all extraction and related activities until the required permit amendments were in place.

Respondents finally acted.

Respondents requested a hearing on the emergency order and argued they could not be held in violation of an expired permit. They asserted that by either the express terms of the permit or by operation of law, the permit was expired. The lower court affirmed the administrative order and issued a final judgment directing Respondents to cease all gravel extraction activities on the residential project lot until they received the necessary permit amendment. Respondents appealed to SCOV, renewing their claim that the enforcement action and trial court judgment were based on an expired Act 250 permit and are therefore invalid.

SCOV quickly disposes of the matter using the doctrine of res judicata to conclude that Respondents’ claim is barred.

Res judicata or claim preclusion bars subsequent litigation if the parties, subject matter, and causes of action in both matters are the same or substantially identical. This Court points out that the doctrine bars not only those claims and issues that were previously litigated, but also those that could have been litigated in a prior action. SCOV states that as long as the parties had adequate opportunity to litigate, the doctrine applies evenly to administrative decisions when the agency acts in a judicial capacity and the parties and subject matter meet the same test.

The High Court points out that the Respondents’ claim challenging the validity of the enforcement proceeding was one that could and should have been raised earlier in the administrative and judicial proceedings between the parties. Respondents had the right and ability to litigate each issue prior to judgment. Instead, they did nothing.

Finally, Respondents argue that if the permit had expired, the NRB and the courts were without subject matter jurisdiction over the Act 250 enforcement action and the abandonment claim could be raised at any time. SCOV disagrees.

The Court does distinguish subject matter jurisdiction—as the fundamental "power of the courts to hear determine a general class or category of cases"—from the simple authority to act, and notes it has been careful to limit the concept in Act 250 and other administrative contexts where an agency generally exercises limited powers because “virtually any disagreement with its actions can be phrased in jurisdictional terms.” SCOV, therefore, finds no reason to exempt Respondents’ jurisdictional claim from the general claim-preclusion rules and affirms the lower judgments on this basis.